Monday, October 2, 2017

India removes GST on supply of services for transit cargo

India has removed the goods and services tax on services provided by Indian service providers for transit cargo like transportation, insurance, shipment, container freight station and cargo handling charges.
Indian Finance Ministry – issuing a notification – informed about the GST waiver considering these services provided by the Indian service providers as ‘service export’.
Joint secretary at the Commerce Ministry Rabi Shanker Sainju confirmed that India has waived the GST on supply of services associated with transit cargo to Nepal and Bhutan – landlocked countries – through a recently published Gazette notice.
The new provision introduced by government of India had come into force from September 29. "Nepali traders making payments in Indian currency to procure aforesaid services will not have to pay GST now," he said, adding that Indian government had earlier levied GST since July 1.
Since the Indian government introduced the GST, services like transportation, cargo handling and container freight station had became costlier as the GST rule recognised and exempted GST only, if the service procurer made payment in convertible foreign currency. Though GST is not applicable on export of goods and services, it recognised service export only if the Indian supplier received payment in convertible foreign currency.
Nepal had requested the Indian government for GST waiver citing that services procured by Nepali traders in India should be taken as service export. Likewise, Nepali private sector – during the Prime Minister Sher Bahadur Deuba's India visit – had also requested the Indian authorities to waive the GST on Indian service providers for transit cargo like transportation, insurance, shipment, container freight station and cargo handling charges as it is against the Nepal-India Bilateral Trade and Transit Agreement. The Indian government officials, especially then Commerce Minister Nirmala Sitharaman – currently Defence Minister – had with Nepali private sector vowed to waive GST, if it is against the bilateral agreement.
The central bank encourages traders to make payments in Indian currency for transactions in India to prevent chances of embezzlement of convertible foreign currency like US dollar by Nepali traders.
Nepal has requested GST waiver for all services procured by Nepalis in India, like software, business process outsourcing, knowledge process outsourcing and other technical services as well, according to Sainju. "However, India has amended GST rules only for services related to transit cargo that includes road and rail transportation, shipping line charges, cargo handling charges."